Upon entering into a marriage, all property earnings and debts from the date of the marriage are community property. The divorce process requires couples to divide all assets and debt equally.
Community Property
Most divorces and legal separations involve significant property issues. Even when the parties have no property, often there is “community” debt that must be allocated between the parties.
In California, community property assets and debts are usually divided 50/50. While each spouse keeps his/her respective separate property, sometimes separate and community property becomes commingled and is presumed to be “community property” until proven otherwise by one of the spouses. A forensic tracing of property can be performed by a suitable expert to identify a spouse’s separate property.
In most divorces, the major focus and typically the major point of contention is the division of marital property. Valuation and proper characterization of all community assets and debt are essential to achieving a fair property settlement.
When necessary, a forensic accountant or other expert is retained to help identify a spouse’s separate property in addition to the value of various assets such as a business, home, or boat.
Protection of Business Interests
One of the most contentious areas in a divorce can be the protections of one’s business interests. Both spouses need to be compensated for any community property interest they may have in a business.
Often, a forensic accountant or other professional is hired or appointed if a business is owned by a spouse. This allows for personal expenses being run through the business and other benefits that should be considered as income to be identified and considered by the courts.
Asset Valuation/Hidden Assets
Valuating Hidden Assets during Divorce
We are experienced in working with leading forensic accountants and business valuation experts to identify, properly value, and divide community property assets. It is not uncommon for one spouse to attempt to hide community property assets or to cause a community business he or she controls to appear to have decreased in value. Whether you are trying to uncover your ex-spouse's hidden assets, protect your separate property, or prevent the loss of an unfair portion of your business, our divorce attorneys are here to help you
How are Marital Assets Hidden?
It is particularly common for a spouse to hide assets when he or she has been primarily in control of the family’s finances. This can also true when both spouses, for one reason or another, have kept their respective finances and accounts separate, even though the law still considers such assets community property and requires that they be divided evenly. Funds and property can be hidden by a variety of means, such as holding accounts or title to property in a sibling's or friend's name (often referred to as a fraudulent transfer). One spouse may also attempt to artificially deflate the value of an asset that contains a community property interest, such as a business.
Such conduct is a violation the spouse's fiduciary duties and can result in the harmed spouse being awarded more than his or her one half community property share of the asset as a punishment to the wrongdoing spouse.
Among several other techniques, accounts can be manipulated to:
- Make the company appear less profitable than it actually is in reality.
- Cause the business to have false or inflated debts and/or expenses.
- Postpone and/or hide accounts receivable.
If the wrongdoing spouse is caught lying under penalty of perjury, they can be subject to criminal punishment. On family law matters, the judge may also find that such a party lacks credibility and therefore the judge may not tend to believe his or her testimony.
If houses or rental properties are owned prior to marriage but community property is used to finance renovations, improvements, or mortgage payments, the community will typically acquire at least partial interest in those properties.